Steps In Mortgage Pre-Approval Process
This Article On Steps In Mortgage Pre-Approval Process Was Written By Gustan Cho
Understanding the mortgage process can seem overwhelming to those who are not familiar with the overall mortgage loan process. Often times mortgage loan borrowers enter into the mortgage loan process without ever knowing what steps in mortgage pre-approval process or stages there are in the steps in mortgage pre-approval process of purchasing a home. In this article, we will explore the Steps In Mortgage Pre-Approval process.
In my previous article, “Steps In The Mortgage Application Process” we discussed items that would be required as part of the mortgage application process. Once you have provided the required application documentation and a credit report has been obtained, your Mortgage Loan Officer will go to work using the automated underwriting system to pre-approve the mortgage application.
Steps In Mortgage Pre-Approval Process: What Is A Pre-Approval?
The pre-approval stage is hands down the most important stage of the entire mortgage process and the main reason for a last minute mortgage loan denial is because the pre-approval was not issued correctly. Here are some important check points:
- There is more to just looking at the credit scores to see if the borrower meets the minimum credit score requirements or just looking at the paycheck stubs to see how much the borrower makes.
- A competent diligent loan officer will carefully review the borrower’s overall credit history on their credit report, question any potential erroneous credit tradelines or credit items, review the borrowers tax returns and make sure that the lender they are employed by does not have any particular mortgage lender overlays that may pertain to the borrower he or she is currently qualifying.
- Borderline mortgage applicants should always be submitted to the automated underwriting system for an automated approval prior to issuing a pre-approval.
- There is no reason why any loan who has been solidly pre-approve for not to close.
- What exactly is a pre-approval and what does it mean?
- A pre-approval comes after all application documentation has been reviewed, the loan application has been submitted to an automated underwriting system (AUS), and careful review of the AUS results.
- AUS can provide different responses based on the information entered, but the most favorable response is “Approve/Eligible”.
- This is stating that the loan application is approved as long as the conditions listed are met and that it is within or meets the program guidelines.
Steps In Mortgage Pre-Approval Process: Automated Underwriting System
Both Fannie Mae and Freddie Mac have their own version of the Automated Underwriting System, often referred to as AUS. Both Fannie Mae and Freddie Mac Automated Underwriting System works as follows:
- The Automated Underwriting System is a sophisticated computer system where it analyzes the borrower’s credit scores, credit history which includes public records, income, assets, and the borrower’s disclosures.
- Within seconds, the Automated Underwriting System will render its decision.
- Most mortgage lenders will have mortgage lender overlays which are additional mortgage lending requirements that are in addition to the minimum mortgage lending guidelines by the particular mortgage loan program such as FHA, VA, USDA, Fannie Mae, and Freddie Mac.
Once a Loan Officer obtains the AUS Approve/Eligible results, they will then be able to issue the Pre-Approval letter within the limits outlined by the underwriting system. It is important that your Loan Officer take a little time examining your entire file, anticipating those items that may come into question by the Underwriter, and closing any gaps in advance of the issuance of the Pre-Approval letter. By doing so, this will ensure that your pre-approval is solid and that your loan will go through to the closing process.
About The Author: Gustan Cho Of Gustan Cho Associates
Gustan Cho is the Editor In Chief Of Gustan Cho Associates Mortgage And Real Estate Information Center and a mortgage loan originator. Gustan Cho and The Gustan Cho Team at Gustan Cho Associates are experts on FHA Loans, VA Loans, USDA Loans, Conventional Loans, Reverse Mortgage, FHA 203k Loans, Non-QM Loans, and alternative financing loan programs. The Gustan Cho Team at Gustan Cho Associates is a one stop lending shop and specializes in originating and funding government and Fannie/Freddie mortgages with no lender overlays. As long as you, as the borrower, can get an approve/eligible per DU FINDINGS and/or LP FINDINGS, and can satisfy the conditions on the automated findings, you can rest assured that your FHA Loan will close. Gustan Cho is a mortgage banker and can originate, fund, and service FHA, VA Loans, USDA Loans, and Conventional Loans with minimal or no lender overlays. Gustan Cho and The Gustan Cho Team at Gustan Cho Associates is available to take your phone call 7 days a week and answer any questions you may have and issue you a pre-approval letter. Gustan Cho can be reached at 1-262-716-8151 or email Gustan at firstname.lastname@example.org .